Delving Into the Earnings Call

The last time I talked about an Activision Blizzard earnings call, I had just quit the game myself. Now in Q3, you have undoubted heard that a further 800k subs were lost, bringing WoW down to 10.3 million. For those keeping track at home, the last time WoW was at ~10 million was in 2008 right during the release of TBC in China.

While sites like MMO-Champion and WoW Insider are nice for giving us summaries, I’m interested in the nuance inside the earnings call itself. Feel free to read alongside me at home (curtsey of Seeking Alpha).

1. Majority of the sub loss is occurring in the East.

You have probably already read the above bullet-point summary, so I’m here to assure you that Morhaime does not get more specific than this.

2. Implicitly, the difficulty of Cataclysm content was the cause of sub losses.

Feel free to try and read something different from these paragraphs (emphasis added):

That said, we know there are improvements that we can make in gaming content. The level-up content in Cataclysm is some of our best works. But it was consumed quickly compared to our past expansions set, Wrath of the Lich King. Once players reached max level, the end-game content in Cataclysm is more difficult. Balancing this content for our diverse player base can be very challenging.

Our development team is constantly analyzing the game, and we’re continuing to explore ways that we can adjust the game to better satisfy both hard-core and casual players. To that end, our next free major content update for World of Warcraft is already in testing and will be available for players in the coming weeks.

Now, the funny thing about this is how Blizzard may have cost themselves millions of dollars in lost revenue by pushing Cataclysm on the Chinese instead of letting Wrath work its magic. After all, Cataclysm was released in China on July 12th whereas Wrath was out in mid-August of 2010, a difference of 11 months. I am not sure whether Cata heroics came pre-nerfed like they ended up in the West, but even if they did it would still be worlds different than how it was in Wrath.

Which, no matter your feelings on the expansion, gained ~1 million subs and largely kept them until Cataclysm.

3. Expect some (more) “aggressive” World of Warcraft marketing.

Specifically: “We have other aggressive marketing plans in the coming months for World of Warcraft, but we’re not ready to share details yet.” Morhaime was then grilled in the Q&A section for further information.

Can you give us some additional color on what’s happening to engagement and subscriber levels for World of Warcraft, particularly following that big expansion pack announcement? Where do you think the subscribers are actually going? And I’ve got a quick follow-up.

Okay. Well, as you know, we don’t provide a forecast on subscribership levels. But I’ll say is that the announcements at BlizzCon were incredibly well received. There’s a lot of excitement around the expansion and the upcoming content in the next patch, which will be introduced in the next couple of weeks. It is currently in test on our public test realm, and we’re very excited about that content. I guess, I can say this, the majority of the declines were in the East. China still represents more than half of our global player base and historically, December has been a very good month for subscriber trends. We have a number of initiatives planned. We plan to be very aggressive in terms of our marketing promotions, and we’re looking forward to the end of the year.

It is an open question what kind of aggressive marketing Blizzard can even do with WoW. If they lowered prices on some of the other services like server transfers or even weekend sales or whatever, that might go a long way in getting me back – I’m not coming back to a dead server and then immediately spending $35+ to move one toon and just 10% of my wealth somewhere else.

Beyond that, what can they do? I doubt something like the cost of the box is keeping people away.

4. Patches are more about recapturing the recently churned.

Nothing ground-breaking, I just find it interesting.

Just out of curiosity, when you’ve had big patches before with World of Warcraft, what type of subscriber uplift do you typically see?

Well, historically, with the content updates that we’ve done, it’s really not intended to go out and drive new user acquisition, that’s a whole other strategy. But it does drive engagement with the game, and so that will impact churn, if we do it successfully and eventually will drive win back, as players tell each other about the content they’re enjoying. We’ll hopefully see a lift in our ability to win back players that may have already churned.